Pharma Needs To 'Decide What It Wants To Be When It Grows Up'

Scrip Intelligence interviewed Russell Reynolds Associates'
Dana Krueger for their article, "Pharma Needs To 'Decide What It Wants To Be When It Grows Up'" about the changing market realities in the pharmaceutical industry and how to best adapt to them.
The article is excerpted below.

Pharmaceutical and biotech companies need a new generation of confident, innocative, adaptable leaders to stay ahead of the game, according to a recent report from consultancy Russell Reynolds Associates.

In the report, Innovation Leadership: Enhancing Scientific Acumen in the Pharma Boardroom, researchers highlight that pharma companies need to continue to move away from the over-processed culture that still governs many organizations in order to “put the delivery of science center stage.”

Current concerns for the industry, including consolidation, regulatory uncertainty and changing product portfolios, mean that the conventional R&D model is falling more and more out of sync with business needs. Moreover, the challenge of growing shareholder value means that the effectiveness of a company’s leadership in terms of delivering on innovation is more critical than ever before, the report notes.

In a recent interview report author Dana M. Krueger, global leader for biotech and pharmaceuticals at Russell Reynolds, told Scrip’s Lucie Ellis that the industry needs to act now on constructing and evolving its leadership teams to ensure its future growth and success.

Lucie Ellis: In your report you say in order to “adapt to the changing market realities and ensue long-term value creation, pharma companies will need a new generation of confident, innovative, adaptable leaders.” From where should companies seek these new leaders?

Dana Krueger: I would answer this with a very direct piece of advice, which is companies should be open to, and in fact able to grow, what we often refer to as ‘All Stars’. I have noticed clients often fall back on trying to recruit expertise, especially when they look outside of their own organization to recruit new people. They prioritize this expertise rather than outwardly looking for agile leaders. One of the things we have been looking at is psychometric data such as, ‘What is unique about just CEOs? If you look at the data there are actually three traits that stand out for CEOs only and they are: an ability to anticipate the future; resilience; and the capacity to monitor and manage one’s own emotions. It’s obvious of course, that none of these CEO traits are linked to any kind of expertise.

The other interesting thing I noticed is that if you look at pharma CEOs only and you look at the types of people being recruited externally, there are more diverse profiles there than where people are coming up through the ranks in their own organizations. It’s about finding these people with broader sets of experience.

LE: Do you think higher levels of management need more of a scientific influence?

DK: There is not a single answer because it really does depend on the strategy of the company. Even just at pharma and biotech firms you have a diverse set of strategies. But let us assume that the strategy is to develop, manufacture and commercialize therapeutics. If that’s the case visionary strategies to drive effective decision making regarding R&D and R&D dollars really do benefit from greater scientific insight at leadership levels. So this principle would also extend to the supervisory board, where scientific and functional expertise related to drug development is arguable increasingly needed to fulfil these core responsibilities to the strategy and to creating shareholder value.

LE: What types of people do you think are missing from boards of top pharma companies?

DK: Agile leaders. Companies should be thinking about how to grow that leadership profile within their own organization. I would also point out that if you look at the profile of the top big pharma companies’ board members, only 25% have any kind of R&D in their background. However, three quarters of them are experienced in the academic environment. If you go back to the premise that these companies want to develop new drugs, is 25% R&D experience enough? It’s great they have board members for a research standpoint, but do they have the right competencies in terms of drug development? I think that is the key question from this report.

LE: How would a company identify this issue?

DK: They would identify the issue simply by looking at their own boardroom. We help clients all the time in doing assessments of the capabilities they have in each individual member of their management team. It would be easy to identify if the company has management and board members with track records for drug development or not, it’s really just an exercise to work through.

In terms of sourcing people who have that expertise, they are all over the industry. It is a matter of linking back to your strategy and again identifying what you care most about: for example, is it late-stage development, a particular therapy area, or is it knowledge of a particular region? The answer to that question candidate. Identifying if a company has a gap in their expertise is an exercise in assessing its board regularly.

LE: How would you define “balanced leadership” on a board or management team?

DK: Balanced leadership is having the right people to make the vital decisions for the company. Again this will differ across the industry but we believe any pharma or biotech compant needs to have both business and scientific acumen represented.